How to Start an LLC in Kansas? (10 Steps Guide)
Embarking on the journey of setting up an LLC in Kansas marks the beginning of an exciting chapter for any entrepreneur. This process involves navigating through a series of legal requirements and making key decisions that lay the foundation for your business's future.
With over ten years of experience in the business realm, I have developed a comprehensive understanding of the nuances of LLC formation, specifically tailored to the distinct business landscape of Kansas.
In this guide, I will share the insights and expertise I've gathered, backed by a team of seasoned business professionals providing a step-by-step walkthrough on how to establish your LLC in Kansas.
Forming an LLC can be a complex process if you lack business experience. To simplify this, consider using a Kansas LLC service provider, especially those offering free LLC formation.
- To form an LLC in Kansas, one must choose an appropriate business structure, name the LLC compliantly, select a registered agent, and file Articles of Organization with the state.
- Following LLC formation, it's advisable to create an operating agreement, apply for an EIN, and open a business bank account for proper financial management.
- The filing fee for Kansas LLCs is $160 for online applications and $165 for those submitted by mail.
- Properly setting up an LLC in Kansas, in my opinion, is crucial for safeguarding personal assets and ensuring legal and financial organization.
How to Form an LLC in Kansas
To form an LLC in Kansas, you have to follow certain steps and file the necessary business documents to comply with state laws.
1. Choose the Type of Your Kansas LLC (Mandatory)
As a business consultant, I've advised numerous clients on choosing the right LLC structure, a decision that can significantly impact their business's legal and financial landscape.
- Single-Member LLC: Ideal for solo entrepreneurs. This structure is straightforward to set up and manage, with fewer compliance requirements. Its simplicity in tax filing is appealing, but clients should be aware of the potential for personal liability and difficulties in raising capital.
- Multi-Member LLC: Suitable for businesses with multiple owners. It allows for shared responsibility and pooled resources, which can be a great advantage. However, it can also lead to potential internal conflicts and requires a more complex management structure, not to mention the intricacies in tax filing.
- Series LLC: A good fit for those managing multiple properties or businesses. This structure provides excellent asset protection and operational efficiency by segregating assets and liabilities within different series. However, it can be administratively complex and sometimes confusing for investors and stakeholders.
- Professional LLC: Designed for licensed professionals, such as doctors and lawyers. It offers liability protection and specific tax benefits, but does not protect against malpractice claims. Also, all members must be licensed professionals, which can be a limitation.
In my consultancy, I emphasize that the choice of an LLC type should be guided by the specific business needs, financial objectives, and risk tolerance of each client.
A well-informed decision in this regard lays a solid foundation for business success and legal compliance.
2. Choose a Name for Your LLC (Mandatory)
The name of your LLC must comply with Kansas naming requirements. It must contain the words "limited liability company" or the abbreviation "LLC."
The LLC name cannot be the same as, or too similar to, an existing business in Kansas. You can check for the availability of a business name by looking up LLCs on the Kansas Secretary of State website.
Once you have chosen a company name, you can reserve it.
At this point, you can also think about getting a domain name. Having a website with your company's name will help your customers find you and learn about you.
Some LLC owners decide to use a name that is different from the business name on the formation files. That is called a DBA or a trading name.
3. Select a Registered Agent (Mandatory)
A resident agent, also known as a registered agent, is an individual or business entity located in Kansas that will accept legal papers on behalf of your LLC .
This is an essential role because it ensures that you will be notified of any legal proceedings that might arise against your company.
It is needed to hire a reliable registered agent service in Kansas. A registered agent must also be available during regular business hours.
Agencies usually operate during normal business hours, so you won't have to worry about missing any documents from the State.
4. File Kansas Articles of Organization (Mandatory)
Once you have completed the previous steps, it is time to file your articles of organization with the Kansas Secretary of State.
You can file it online or by mail. Kansas limited liability company Articles of Organization should include:
- Name of your Kansas LLC
- Address and name of your registered agent or registered agent service
- Your business mailing address (it can be different from the registered address)
- Tax closing month (most businesses select December to stay on the calendar year)
- Effective date ( the date your LLC officially starts)
- Signature of the authorized person (such as an owner of the LLC)
Some clients are unaware that they can customize the Articles of Organization beyond the basic requirements. For instance, they can specify different classes of membership or outline specific management structures. Guiding them through these options can tailor the LLC to their specific business needs.
The filing fee is $160 if you file online and $165 if you send it by mail.
After your articles have been filed, you will receive a Certificate of Organization from the Kansas Secretary of State. This document will prove that your LLC has been officially formed and are now ready to begin doing business as an LLC in Kansas.
If you're growing your current LLC to the State of Kansas, you will need to form a Foreign LLC.
Read More: How to Register a DBA Name for Your LLC
Steps to Take After Forming an LLC in Kansas
After establishing your LLC in Kansas, it is advisable that you open a separate business bank account, choose your company’s tax classification and apply for licenses and permits.
5. Create an LLC Operating Agreement (Optional, but Recommended)
Even though the State of Kansas does not require you to have an Operating Agreement, it is a vital document for your LLC that outlines the rules and regulations that your company will follow.
The Operating Agreement should include:
- The names and addresses of all members and managers
- How profits and losses will be divided among members
- How the LLC will be managed and its business structure
- The procedures for adding and removing members
- The process for dissolving the LLC
This document should be reviewed and updated regularly, as things in your business may change.
Having a Kansas LLC Operating Agreement is especially important if you have more than one member in your LLC. It will help resolve business issues that may arise in the future.
Operating agreements also help keep your business assets and personal assets separate in the eyes of the court.
6. Apply for an Employer Identification Number (EIN) (Optional, but Recommended)
As a business consultant, I've advised numerous clients on the importance of obtaining an Employer Identification Number (EIN), also known as a Federal Tax Identification Number.
The EIN is a critical tool used by the Internal Revenue Service (IRS) to identify and track business entities for tax purposes.
Drawing from my first hand experience, even if a business doesn't plan to hire employees immediately, having an EIN can be beneficial.
It's often required for various business activities, such as opening a bank account in the business's name, applying for business permits, or establishing credit with vendors.
You can apply for an EIN online or by mail to the Kansas Department of Revenue. The application includes:
- The name of your Kansas LLC
- The name and title of the person applying for the EIN
- Type of entity
- The business address and phone number
- Signature of the person applying
7. Open an LLC Bank Account (Optional, but Recommended)
Now that your LLC is officially formed, it's time to open a separate LLC bank account. A business bank account is essential because it will help you keep track of your company finances and prevent any commingling of funds.
When opening a bank account for your LLC, you will need to provide the following information:
- A copy of the Kansas LLC Articles of Organization
- EIN (also known as federal employer identification number)
- A copy of the LLC operating agreement
- Your signature
Once your bank account is open, be sure to keep track of all transactions and make regular deposits. A separate bank account will help you stay organized and ensure that your Kansas LLC runs smoothly.
8. File Your Kansas LLC Annual Report (Mandatory)
Business entities in Kansas must file annual reports with the Secretary of State. You can file an annual report online or by email.
The annual report filing fee is $50 if you file it online and $55 if you send it in by mail.
The due date to send your Kansas LLC annual report is the 15th of the fourth month after LLC's tax closing month.
For example, most LLCs choose December to be tax closing month, so that means that you should send your annual report by April 15th.
See our article for more information on Kansas LLC registration fees.
- How to Dissolve an LLC in Kansas
- Best LLC Services in Kansas
- How Long Does It Take to Form an LLC in Kansas
9. Obtain Business Licenses and Permits
In my role as a business consultant, I've guided several clients through the process of obtaining business licenses and permits in Kansas. I can attest that it's a task requiring a thorough understanding of both state and local regulations.
Each jurisdiction within Kansas can have its own set of requirements, which adds layers of complexity.
At the state level, industries such as cosmetology, body art, tanning, and barbering require specific licensing, managed by the Kansas Board of Cosmetology and the Kansas Board of Barbering. This includes licenses for individual practitioners as well as facility permits.
Businesses involved in selling liquor or tobacco products also need to secure appropriate licenses.
At the local level, different cities and counties in Kansas have varied requirements for contractor licensing and other business activities. These can range from construction and building permits to specific trade licenses.
It's essential for business owners to research and comply with both their city and county regulations.
Moreover, businesses must consider federal licensing requirements if they operate in federally regulated industries, like alcohol and tobacco sales, broadcasting, and aviation.
Keeping track of renewal periods for these licenses is crucial to ensure ongoing compliance.
10. Choosing Your Tax Structure
Choosing the right tax structure for your business in Kansas is a crucial decision that affects both your legal liability and tax obligations.
The common structures include:
- Pros: Easy to establish and manage, with full control over business decisions.
- Cons: Personal liability for business debts and obligations.
- Pros: Shared responsibility and resources between partners.
- Cons: Joint liability for the actions of other partners.
Corporation (C Corp):
- Pros: Limited personal liability, ability to raise capital through stock sales.
- Cons: Double taxation (corporate profits and shareholder dividends).
- Pros: Avoids double taxation, limited liability protection.
- Cons: Restrictions on the number and type of shareholders.
Limited Liability Company (LLC):
- Pros: Limited liability, flexibility in taxation (can choose to be taxed as a corporation or pass-through entity).
- Cons: More complex to establish than a sole proprietorship or partnership.
I would prefer an LLC for its flexibility and limited liability. LLCs offer a balance between the ease of a sole proprietorship/partnership and the formal structure of a corporation. They are particularly beneficial for small to medium-sized businesses.
Regarding changing your tax structure in Kansas, it's important to consult with a tax professional for specific deadlines and requirements. Generally, changes in tax structure can involve filing appropriate paperwork with the Kansas Secretary of State and the IRS, especially when transitioning to or from structures like a corporation or S corporation.
Benefits and Drawbacks of an LLC in Kansas
- Limited Personal Liability: Like in other states, Kansas LLC owners are protected from personal liability for business debts and lawsuits. This means personal assets are generally safe if the business incurs debt or is sued.
- Tax Flexibility: LLCs in Kansas benefit from pass-through taxation, where profits are taxed only once at the personal income level, avoiding the double taxation seen in corporations. Additionally, LLCs can choose to be taxed as a corporation if it's more beneficial.
- Ease of Formation and Maintenance: Setting up an LLC in Kansas is relatively straightforward, with fewer formalities and paperwork than corporations. The ongoing maintenance, like annual reporting, is also simpler compared to corporations.
- State Tax Environment: Kansas has a supportive tax environment, shown by a 2.1% increase in small business loans in Q1 2020 as per the US Small Business Administration, indicating strong business support, reflecting the state's supportive stance towards businesses during challenging times . With pass-through taxation, LLCs bypass corporate income tax, making Kansas attractive for business startups and growth.
- Limited Growth Potential: LLCs in Kansas may face challenges in raising capital since they can't issue stocks like corporations. This could limit growth opportunities for businesses looking to expand significantly.
- Self-Employment Taxes: Profits from an LLC are subject to self-employment taxes. This could be higher than the corporate tax rate, depending on the business's profits.
- State-Specific Fees and Regulations: While generally LLC-friendly, Kansas has its own set of fees and regulations that may differ from other states. For instance, there are annual reports and fees that must be filed and paid to maintain good standing.
- Transferability of Ownership: In Kansas, unless otherwise stated in the LLC operating agreement, the transfer of ownership can be more complicated compared to a corporation. This can affect the long-term planning and flexibility of the business.
DIY vs. Professional LLC Formation
DIY LLC Formation
- Cost-Effective: DIY formation is generally less expensive than hiring a professional service. This can be a significant advantage for startups on a tight budget.
- Control and Understanding: Handling the process yourself provides a deeper understanding of your business’s legal structure and state-specific requirements.
- Direct Involvement: You have complete control over the formation process and immediate access to all the documents.
- Time-Consuming: The DIY route can be time-intensive, requiring substantial research and learning.
- Risk of Errors: Without expert guidance, there's a higher risk of making mistakes in paperwork or compliance, which can lead to legal or financial issues down the line.
- No Legal Advice: DIY doesn’t provide legal counsel, which can be crucial for understanding implications of different LLC structures, especially for complex businesses.
Professional LLC Formation Services
- Expertise and Compliance: Professional services bring expertise, ensuring accuracy and compliance with state regulations.
- Time-Saving: Delegating the formation process saves time, allowing you to focus on other aspects of your business.
- Additional Services: Many professional services offer extras like registered agent services, compliance alerts, and ongoing legal advice.
- Cost: The primary downside is the cost, which can be a significant investment compared to the DIY approach.
- Less Hands-On Knowledge: Using a service may result in less understanding of the intricacies of your LLC’s legal structure.
- Variability in Quality: The quality and extent of services offered can vary significantly between providers.
When choosing between DIY and professional LLC formation, consider factors like your budget, how much time you can dedicate to the process, your comfort level with legal paperwork, and the complexity of your business structure.
If you have a straightforward business and are comfortable with legal processes, DIY might be a good fit.
However, if your business has more complex needs, or if you prefer to ensure everything is handled correctly without investing your time, a professional service might be more appropriate.
What Is a Kansas Foreign Limited Liability Company?
A Kansas foreign limited liability company is a foreign LLC that has been formed in another state and expands operations in another.
Can I Be My Own Registered Agent in Kansas?
Yes, you can be your own registered agent in Kansas, as long as you’re of legal age and meet the Kansas Secretary of State requirements.